"Even if only part of that potential were realized, home prices could stabilize, or, in certain communities, increase at the lower end of the market," the research states in the firm's "Mortgage Insight" report.

The report states that simple profitability metrics are driving investor interest in the space, where they will compete for the best margins with potential owner-occupants. This is not likely the case at the higher end of the market.

"A $600,000 home does not rent for five times the rent on a $120,000 home," the report states.

The gross cap rate on properties worth less than $100,000, purchased for renting, is between 14% to 25%, Amherst concludes. The gross cap rate drops below double digits around the $200,000 market. Jumbos, by way of comparison, earn a gross cap rate of less than 7%.

"At current price levels, lower-priced homes are attractive to both an owner-occupant and to an investor," the report states. "By contrast, higher-priced homes can be sold only to owner-occupants."

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Jacob Gaffney is the Editor-in-Chief of HousingWire and HousingWire.com. He previously covered securitization for Reuters and Source Media in London before returning to the United States in 2009. While in Europe for nearly a decade, he covered bank loans and the high yield market, in addition to commercial paper, student loan, auto and credit card space(s). At HousingWire, he began focusing his journalism on all aspects of the housing and mortgage markets.

Commentary

With the recent turnover in leadership at the Federal Housing Finance Agency, we may be standing at the precipice of great change in the government’s role in supporting the mortgage market through Fannie Mae and Freddie Mac.